MRS Placed Under Review Following Latest Court Filing by AMCON

Proshare

Tuesday, July 12 2016 3:28PM /Meristem Research

Following the latest news inflow on a court filing by the Asset Management Corporation of Nigeria (AMCON) (suit No:  FHC/L/CP/923/2016) against MRS Holdings (the parent company of MRS Oil Nigeria Plc.) to force the company into compulsory liquidation in order to pay down loans (c.NGN81bn) owed to AMCON, we hereby withdraw our rating on the stock from the current “BUY”. We currently place the counter “Under Review”.

MRS Holdings currently has six (6) subsidiaries namely MRS Oil Nigeria Plc, MRS Oil & Gas Limited, Corlay Benin, Corlay Cameroun, Corlay Togo, and Petro West Limited.

MRS Oil Nigeria (MRS) reduced its loans (mostly bank overdraft and short term borrowings) as at Q1:2016 to NGN15.02 (-8.39%), from NGN16.40bn in FY2015.

A cursory review of its latest financial records, Q1:2016, reveals the company’s liquidity situation currently reflects a stable position, with its current ratio at 1.19x (vs. 1.17x in FY2015), above the peer average of 1.10x in Q1:2016, while its cash ratio improved to 0.66x from 0.49x in FY2015. We also note that MRS has the third (3rd) highest debt-to-equity ratio (70.40%) amongst peers (Q1:2016 peer average of 50.21%) in the period, after TOTAL and FO, and the company’s total debt ratio (67.92%) holds marginally above the peer average of 67.28% in the period. The company’s leverage ratio was 3.12x in Q1:2016 (vs. 3.19x in FY2015), below the peer average of 3.19x.

Until we have further clarity on this latest information and impasse, and also review its impact/implications on the company’s operations, we shall suspend our rating and also advise clients and investors alike to exercise some restraints on the company’s share.

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